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Wall Street Looks Forward To The Holidays

Big profits? Big bonuses? What’s not to like about the coming holiday season if you’re on Wall Street?

The New York Times’ Zachery Kouwe wrote today:

Ten months ago, President Obama said a time would come for Wall Street to make profits and pay bonuses, but “now’s not that time.” But it appears that was exactly when Wall Street began to return to profitability.

In a report released Tuesday by Thomas P. DiNapoli, the comptroller of New York State, Wall Street profits in 2009 are on track to exceed the record set three years ago, at the height of the credit bubble. The report noted that the four largest investment firms in Manhattan — Goldman Sachs, Merrill Lynch, Morgan Stanley and the investment banking arm of JPMorgan Chase — earned $22.5 billion in the first nine months, in contrast to losses of more than $40.3 billion in 2008, primarily at Merrill.

“The national economy is slowly improving, but Wall Street has recovered much faster than anyone had envisioned,” Mr. DiNapoli said in a statement…

In turn, the profits are contributing to a resurgence of bonuses on Wall Street. Six of the top American bank holding companies set aside $112 billion for salaries and bonuses, including deferred payments, in the first nine months, Mr. DiNapoli reported. The six banks are Bank of America, Citigroup, Goldman Sachs, JPMorgan Chase, Morgan Stanley and Wells Fargo.

If the profits continue, bonuses at the six banks could exceed the $162 billion paid 2007 — the year before the financial crisis hit stock markets. Though compensation has rebounded at the four largest banks, Merrill Lynch, now part of Bank of America, and Morgan Stanley reported a decline in overall compensation.

Don’t despair, Main Street. You can sit around the fire reading Todd Federman’s poems to cheer you up this holiday season whilst Wall Street parties their pants off.

Which, amazingly, might not be the case this year.

From the Wall Street Journal’s “Deal Journal” blog today:

While small businesses and individual Americans continue to suffer from the economic downturn, the banks have to at least restrain from gloating about their good fortune.

Bank of America says “it does not host or fund corporate wide, regional, line of business or staff holiday parties.”

At Goldman Sachs, there’s no holiday party this year nor was there was one last year. And there will be no Goldman sponsored birthday parties either, a spokesperson added.

Citigroup has traditionally never hosted a big corporate-wide Christmas party, though in the past some investment banking units have their thrown their own parties at swank Manhattan venues such as the restaurant Cipriani. Senior bankers and traders used to pay for these fetes out of their own pockets, a Citigroup spokesman said. But even these parties are being canceled due to the hostile political environment this year.

There’s still some room for holiday cheer at Morgan Stanley. The firm said it will not fund any holiday parties in 2009, but managers may still throw their own parties for staffers.

But overall, it looks like not even the holidays can bring a truce between Main Street and Wall Street. Rather, it risks stoking the fire.

The infamous RBS bash across the pond

Sources:

“Wall Street on Track for Record in Profits”
Zachery Kouwe
New York Times, November 18, 2009

“Wall Street Says Bah Humbug, Cancels Christmas Parties”
Susanne Craig, David Enrich, Dan Fitzpatrick, and Aaron Lucchetti
Wall Street Journal (Deal Journal), November 18, 2009